The European Securities and Markets Authority’s (ESMA) latest opinion on conflict of interest requirements introduces a paradigm shift for crypto-asset service providers (CASPS). The regulator’s enhanced framework, unveiled in January 2025, not only suggests a potential separation of legal entities for conflicting services, but also implements strict monitoring of personal transactions and expands the definition of remuneration.
Last week, ESMA published a new opinion paper, unveiling significant changes to its regulatory technical standards (RTS) on conflicts of interest for PSAPs under MICA. These changes represent a crucial step towards stronger investor protection and market integrity.
“ESMA suggests a limited number of modifications to the changes proposed by the European Commission, as explained further below,” the regulator commented in the latest document. “ESMA recognizes that an appropriate balance should be struck between, on the one hand, investor protection and objectives related to financial stability, and on the other hand, the promotion of safe and sustainable innovation.”
A notable addition appears in Recital 4, which introduces a stricter approach to handling acute conflicts of interest. Where standard policies and procedures prove insufficient, PSAPs may need to separate conflicting crypto-asset services into separate legal entities with independent management. This requirement particularly targets situations where conflicts cannot be adequately managed within a single entity or group structure.
Additionally, the new Recital 11 introduces comprehensive requirements for monitoring personal transactions of connected individuals. The framework now explicitly:
- Requires in-depth review of transactions by connected individuals
- MANDATES DOCUMENTS AND APPROVAL PROCESS
- Prohibits transactions that violate MICA regulations
“Recital 11 Mandating the monitoring of personal transactions of connected persons (with the addition of Article 6 on this very specific subject (policies and procedures on conflicts of interest in the context of personal transactions) and that the policies and procedures should include the prohibition of these Transactions that undermine Mica particularly Title VI (Prevention and Prohibition of Market Abuse),” commented Delphine Forma, Policy Leader at Solidus Labs.
Crypto Firms Face Enhanced Oversight
Moving further, the expanded scope of Article 5 presents a comprehensive definition of remuneration that covers all forms of payment, including financial and non-financial benefits, whether provided directly or indirectly by PSAPs in relation to crypto-asset services. This in-depth approach aims to fill potential gaps that could be exploited by alternative compensation structures.
The changes, according to ESMA, should create a more robust framework for casps for:
- Identify and manage conflicts of interest more effectively
- Implement stronger internal controls
- Maintain a clearer separation between potentially conflicting activities
Under the new framework, CASPS must also implement comprehensive policies that incorporate three key elements. First, they must establish detailed procedures for monitoring and identifying personal transactions. Second, they must maintain transparent compensation disclosure frameworks that capture all forms of compensation.
🪙 #Esma And @Eba_news analyzed recent developments in crypto-assets, decentralized finance (DEFI), #crypto Location, borrowing and staking → https://t.co/k2wssoehwa.
This publication contributes to @Eu_commission Report under section 142 of #Mica. pic.twitter.com/led9aemxdz
– ESMA – EU securities markets regulator 🇪🇺 (@esmacomms) January 17, 2025
Finally, they are required to develop organizational structures specifically designed to prevent and manage potential conflicts of interest, with a clear separation of duties and responsibilities where necessary.
The proposed changes are one thing, but the reality is another. During an interview Financial tycoons At FMLS:24, Forma candidly admitted that “the crypto industry is not ready for mica.”
“I don’t think the regulators are even ready,” she added. “Some countries have not even implemented an implementing law. Furthermore, Belgium has not yet even decided who will be the regulator in charge of mica in the country. »
The European Securities and Markets Authority’s (ESMA) latest opinion on conflict of interest requirements introduces a paradigm shift for crypto-asset service providers (CASPS). The regulator’s enhanced framework, unveiled in January 2025, not only suggests a potential separation of legal entities for conflicting services, but also implements strict monitoring of personal transactions and expands the definition of remuneration.
Last week, ESMA published a new opinion paper, unveiling significant changes to its regulatory technical standards (RTS) on conflicts of interest for PSAPs under MICA. These changes represent a crucial step towards stronger investor protection and market integrity.
“ESMA suggests a limited number of modifications to the changes proposed by the European Commission, as explained further below,” the regulator commented in the latest document. “ESMA recognizes that an appropriate balance should be struck between, on the one hand, investor protection and objectives related to financial stability, and on the other hand, the promotion of safe and sustainable innovation.”
A notable addition appears in Recital 4, which introduces a stricter approach to handling acute conflicts of interest. Where standard policies and procedures prove insufficient, PSAPs may need to separate conflicting crypto-asset services into separate legal entities with independent management. This requirement particularly targets situations where conflicts cannot be adequately managed within a single entity or group structure.
Additionally, the new Recital 11 introduces comprehensive requirements for monitoring personal transactions of connected individuals. The framework now explicitly:
- Requires in-depth review of transactions by connected individuals
- MANDATES DOCUMENTS AND APPROVAL PROCESS
- Prohibits transactions that violate MICA regulations
“Recital 11 Mandating the monitoring of personal transactions of connected persons (with the addition of Article 6 on this very specific subject (policies and procedures on conflicts of interest in the context of personal transactions) and that the policies and procedures should include the prohibition of these Transactions that undermine Mica particularly Title VI (Prevention and Prohibition of Market Abuse),” commented Delphine Forma, Policy Leader at Solidus Labs.
Crypto Firms Face Enhanced Oversight
Moving further, the expanded scope of Article 5 presents a comprehensive definition of remuneration that covers all forms of payment, including financial and non-financial benefits, whether provided directly or indirectly by PSAPs in relation to crypto-asset services. This in-depth approach aims to fill potential gaps that could be exploited by alternative compensation structures.
The changes, according to ESMA, should create a more robust framework for casps for:
- Identify and manage conflicts of interest more effectively
- Implement stronger internal controls
- Maintain a clearer separation between potentially conflicting activities
Under the new framework, CASPS must also implement comprehensive policies that incorporate three key elements. First, they must establish detailed procedures for monitoring and identifying personal transactions. Second, they must maintain transparent compensation disclosure frameworks that capture all forms of compensation.
🪙 #Esma And @Eba_news analyzed recent developments in crypto-assets, decentralized finance (DEFI), #crypto Location, borrowing and staking → https://t.co/k2wssoehwa.
This publication contributes to @Eu_commission Report under section 142 of #Mica. pic.twitter.com/led9aemxdz
– ESMA – EU securities markets regulator 🇪🇺 (@esmacomms) January 17, 2025
Finally, they are required to develop organizational structures specifically designed to prevent and manage potential conflicts of interest, with a clear separation of duties and responsibilities where necessary.
The proposed changes are one thing, but the reality is another. During an interview Financial tycoons At FMLS:24, Forma candidly admitted that “the crypto industry is not ready for mica.”
“I don’t think the regulators are even ready,” she added. “Some countries have not even implemented an implementing law. Furthermore, Belgium has not yet even decided who will be the regulator in charge of mica in the country. »
